A CVA is a legally binding agreement between the Directors of a company and its creditors. In basic terms, it allows a viable business breathing space to pay back its creditors.
A CVA (Company Voluntary Arrangement)
A CVA is a debt forgiveness agreement with a company’s creditors to usually only repay a proportion of the amount owed in full and final settlement. During a CVA, the control and management of the business remains with the Board of Directors and, in return for the company committing to repay an affordable part of the debt, its creditors will write off the balance leaving the company debt free.
CVAs were introduced to the UK as part of the Insolvency Act 1986 as a positive alternative to liquidation that would help companies resolve their debt problems. The legislation demands that a CVA must be administered by a licenced Insolvency Practitioner (there are about 1,300 who take insolvency appointments in the UK today). NancollasGreer Insolvency Practitioner, Sarah Nancollas, has over 24 years experience and has been undertaking CVAs since the legislation was first introduced and has a vast knowledge of CVA solutions for all types of businesses.
The payments that are offered to creditors in a CVA can be made from a variety of sources. The most popular being:
Affordable monthly payments from business turnover
A lump sum from a re-financing deal or a third party
Sale of an asset
A combination of the above
The amount a company pays will depend on available income and is agreed and fixed with creditors up front so there are no nasty shocks during the CVA.
AS HMRC are likely to be a creditor one of the first steps is to ensure that any late accounts, VAT returns and tax returns are brought up to date and filed with HMRC as soon as possible. As a creditor they will almost certainly vote on the acceptance or otherwise of a CVA proposal. HMRC will consider proposals favourably where:
An optimized and achievable offer is made to creditors.
Provision is made for payments of all future debts on time (including ALL taxes)
All creditors within the same class are treated equally
There are no exceptional reasons for rejection.
A company makes a full and honest financial disclosure
The above are no different to the requirements of many lending institutes and most of the above are required by the legislation to form part of a CVA.
Once the CVA is approved, creditors are obliged to freeze interest and are no longer able to pursue the company for payment. Once all of the agreed payments have been made, the CVA is concluded and the balance of the company’s debt is legally written off leaving it debt free.
NancollasGreer ( http://nancollasgreer.com ) can advise on whether a CVA is the right solution for your company. They can then work with you, from formulating an offer to a company’s creditors, through to seeking approval from creditors.
NancollasGreer crafted CVAs always retain the core value that they should be sustainable and achievable, yet realistic. NancollasGreer believe that this is the only way that a CVA works and should result in a win/win situation for a company and its creditors.
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We are insolvency practitioners offering free debt advice on IVAs, CVAs, Bankruptcy, Liquidation, Debt Mangement Plans and Administration to individuals, sole traders, partnerships, limited companies, employed, self employed, home owners and tenants.